Tag Archives: Trulia

If you’re in the real estate industry — and why wouldn’t you be if you’re reading this blog — then you know by now that our lords and masters have approved Zillow’s $3.5 billion acquisition of Trulia. The new entity is not named TruZilla, Destroyer of Tokyo; it’s named Zillow Group.

I’ve had the opportunity to spend a few minutes on the phone today with Greg Schwartz, Chief Revenue Officer of Zillow (or is now Zillow Group?), and Paul Levine, the former COO of Trulia, who was named as the President of Trulia in the reorganization. I’ve known both men for years now, and consider them both to be among the best and brightest in the industry, and in the interests of revealing all possible conflicts, I’ve done some work for Paul and had Greg buy me a drink or two at various events. You decide whether I’m incorrigibly biased or not.

In any event, based on those conversations, as well as general stuff floating around, here are my initial few thoughts on the Zillow Group. I have no doubt that we’ll be talking about them much, much more in the future days to come.

Jay Thompson of Zillow celebrating the Edina deal. With what I assume is coffee.

I realize that the news of the day will be the News Corp buying Move, which certainly requires some thought, but since important details are missing from that story as yet and may not be clear for months to come… I figured I should take notice of another sort of significant story that just crossed the wires.

SEATTLE, Sept. 30, 2014 /PRNewswire/ — Zillow, Inc. (NASDAQ: Z), the leading real estate information marketplace, today announced that Edina Realty, a Berkshire Hathaway affiliate, has joined the Zillow® Pro for Brokers program and will display all of its thousands of listings on Zillow for the first time ever. Launched in June 2012, Zillow Pro for Brokers is a free, five-point program that improves listings accuracy, provides better reporting, includes a powerful contact follow-up system and increases the visibility of listing agents for participating brokerages.

“We couldn’t be more excited to be building a relationship with Edina Realty whereby their direct listing feed will be updated every 15 minutes,” said Spencer Rascoff, Zillow chief executive officer. “It has always been our goal to be the best partner to the industry we can be, and in turn, offer the millions of consumers who visit Zillow the best experience possible. Edina Realty joining Zillow Pro for Brokers helps make that a reality. Now, home shoppers in Minnesota and western Wisconsin will have the most accurate and up-to-date view of the market, while home sellers can rest assured their home is being marketed to the largest audience of home shoppers.”

Edina Realty is one of the nation’s largest real estate companies with approximately 60 real estate offices and 2,300 REALTORS® throughout Minnesota and western Wisconsin.

According to Greg Schwartz, Chief Revenue Officer at Zillow, this is a non-monetary deal. Edina’s listing agents would receive preferential placement and clear identification as the listing agent on their listings (i.e., the listing agent would be the top contact among the 3-4 agents in the box). In exchange, Zillow would get a direct feed from Edina, updated every 15 minutes. Zillow would also get Edina’s completed transactions data, which will populate Edina agent profiles. (I assume Trulia’s deal is the same.)

The MLS is not involved in any way, from what I understand. This is an outside-of-Listhub arrangement.

Edina Realty will share its listings information with Zillow for the first time, and the company is re-entering into partnerships with Trulia and realtor.com after pulling its listings from those sites beginning in 2011, citing concerns over accuracy, adequate disclosure of listing agent and broker information, and more.

“The position that Edina Realty took nearly three years ago has positively influenced the business practices of Zillow, Trulia and realtor.com,” said Greg Mason, president and CEO of Edina Realty Home Services. “The national sites have made enhancements in order to improve the consumer experience as well as the relationship with the broker and agent. For example, on Trulia, the listing agent is now identified alongside their listing at no charge to the agent,” said Mason. “Additionally, the sites are striving for greater data accuracy.”

Edina Realty’s website and mobile apps average a combined total of over two million visits every month and are the most highly trafficked real estate website and apps in the region. The company has led the market in sales for 14 consecutive years and is the region’s largest real estate company with more than 60 offices and 2,300 REALTORS®.

“We remain confident that our clients’ listings receive the best online exposure on edinarealty.com and through our mobile apps, but now their listings will also appear on these national online sites,” said Mason.

Edina Realty’s groundbreaking move to pull its listings from Trulia and realtor.com beginning in 2011 contributed to an ongoing industry-wide discourse about data accuracy and ownership, customer service, and legal obligations by non-broker controlled media companies. “We’re committed to providing the best customer experience,” said Mason, “so we’re happy that our position brought greater awareness around issues with accuracy and listing ownership, and that it contributed to many key changes with the national partners,” he added. “We’ll continue advocating on behalf of our clients and agents to deliver the best real estate experience possible.”

So… Edina’s position appears to be that its move to pull its listings in 2011 led to changes at the portals. Specifically, we’re talking about greater commitment to data accuracy, putting the listing agent first (citing Trulia as the example), and improvement in the consumer experience.

Thing is… the three sites have always been different, with different problems.

For example, data accuracy was never a concern with Realtor.com. And given Realtor.com’s primary product — the Showcase Listing — the “three-headed monster” was never a major issue with them either.

If “data accuracy” refers to outdated listing information on the sites, Zillow and Trulia have been hammering that hard for the past few years. The whole point of things like Z-Pro is to get direct feeds so that the data can be accurate. If it refers, instead, to the widely-despised Zestimates… well, I see nothing in either press release suggesting that Zillow will be doing away with that, or using some new broker-powered AVM.

Bottom line, who cares what the motivations were for Edina to reverse course? Maybe it was because they felt that they had spanked Zillow and Trulia enough, that the portals had learned their lesson, and were now behaving correctly. Having achieved those goals, Edina is now going to partner with them. Maybe it was because Edina saw that failing to syndicate to the largest websites in the real estate category was hurting their recruiting, retention, and business. No one really knows outside of Edina’s HQ.

What we do know, and this is significant, is the implication of Mason’s statement: “We’ll continue advocating on behalf of our clients and agents to deliver the best real estate experience possible.”

As of October of 2014, it appears that the “best real estate experience possible” includes advertising on the portals, at least for Edina Realty.

Whether that has any ongoing significance for others remains to be seen.

I’m busy writing, but thought it worthwhile to take a few minutes to make a couple of observations about Realogy. I mean, it’s only the most important brokerage and franchise company in the industry with over $4B in annual revenues….

On “Project Flanker”

First, with regards to this story on Inman… I’ve already told the writer, Paul Hagey (@InmanHagey), who does excellent work in the article, that he should chat with his headline writer. Paul writes:

The nation’s largest real estate brokerage, NRT LLC, is preparing to launch two new search portals that are aimed at reducing the company’s reliance on leads from Zillow, Trulia and realtor.com, attracting homebuyers by offering access to a complete set of MLS listings in markets where NRT operates, plus bells and whistles like automated valuations.

Maybe I’m dead wrong here, but I can’t see how Realogy is outflanking anybody with this new website, even if it’s code-named “Project Flanker”, nevermind Zillow-Trulia. Two reasons, one of which was cited by Hagey in the article:

“It is not intended to compete against the big portals like Zillow or Trulia,” Smith said Monday during Realogy’s second-quarter earnings call. “It is a very different approach to the markets, very smart, I think it is very strategic.”

But to get the full story, one should read the Investor Day transcript as well. This comes right after Bruce Zipf, the head of NRT (Realogy’s company-owned brokerage operations), talked about the “generic URL website” they were working on and a Wall Street analyst started asking about competing with Zillow/Trulia.

Richard Smith:

So that you don’t start modeling a Trulia or a Zillow-like model here. Let me give some color. This is a broker transaction oriented site. We’re creating the opportunity under the radar screen using the URL that’s fairly generic. It will not get the media attention or the financial support that you would expect at Zillow or Trulia because they’re in different businesses.
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But this is to be at the point of sale, to be as close to the decision making process as possible, but outside of our traditional URLs like coldwellbanker.com because then in the context of those sites, we have limitations as to what we can do from a consumer perspective. When you’re outside of that, using the URL that is fairly generic and we haven’t disclosed as of yet, you’re approaching the consumer in a slightly different way.

But they’re not up here where the Trulias and Zillows are. They’re media companies and they do a very effective job for us as media companies. This is when that person moves from Zillow or Trulia closer to the decision making process where we think we can cast in that wide net, we think we can capture more of that business.

So the business is not coming to us directly through the relationships, yard signs, all the other things we talked about. We think when they get to the decision making that I actually want to see this house, we can offer an alternative to what’s out there today, again, adding to the 700 plus.

Just given our size and our market share, we think this can be meaningful to consumer, and then we think it can generate incremental leads. So all of what we’ve discussed with respect to that is in all the discussions we’ve had up to this point, the incremental initiatives in NRT that’s working on that I believe we mentioned in the first quarter. It’s contained in the context of all that discussions. So don’t expect big jumps in marketing spend or technology spend based on that conversation. It’s already on our forecast. [Emphasis mine]

The two takeaways here for me are:

Realogy sees Zillow/Trulia as an important feeder into this “Project Flanker” website, since Flanker.com (I just named it that) is supposed to be further down the sales funnel. That is perfectly in line with what Spencer Rascoff and Pete Flint have always maintained: that Zillow/Trulia is a media company selling advertising opportunities to real estate peeps.

No big jumps on spending = no attempt to outflank. I mean, sure, real estate folks like to believe that since they have the listings, it’s no big deal to attract a consumer audience without spending too much (“Internet advertising is free!”) but… um, no. Given that Zillow and Trulia combined spent a combined $120 million in Q2 (that’s three months, folks) on marketing and technology, let’s not talk about outflanking until Realogy commits real dollars to both marketing and technology.

Seems to me that Realogy’s position is consistent with everything we have heard from brokers, including The Realty Alliance, large independents, and franchised-brokers: they no longer regard the portals as a threat. It’s the MLS they’re concerned about.

The Real Deal

While the real estate industry was completely absorbed by the Zillow-Trulia deal, fact is that Realogy quietly made one of the more important moves in recent years by acquiring ZipRealty. I’m going to have to do more on this at a later date, but read the transcript announcing the acquisition.

For now, let me limit my observation to two points.

Some folks, like Citron Research, thinks that the ZipRealty acquisition is about Realogy outflanking (there’s that word again) Zillow. But as we saw above, I don’t see Realogy looking at Zillow-Trulia as competition; I see Realogy looking at them as the top of the funnel, and Realogy wanting to capture the middle of the funnel, where they can get 35% referral fees from the bottom of the funnel (the agents themselves). So… why is this deal important? Because…

Now that Realogy has this platform, which Richard Smith described in absolutely effusive language (and trust me, Smith is not an effusive type of a guy)… the pressure is on the other major franchises. REMAX, KWRI, BerkshireHathaway… they’d best step on up if they hope to remain competitive with Realogy’s Franchise Salespeople knocking on every door offering the ZipRealty platform to brokers and agents. The real competition for Realogy are other franchises (for its RFG division) and other brokerages (for its NRT division). ZipRealty’s technology platform is a huge advantage in both. The other guys have to step on up.

Thing is, who’s out there that’s got the proven technology assets that ZipRealty has? As far as I know, there’s only one company: Redfin.

My guess? I think REMAX acquires Redfin, if Redfin is even remotely available for acquisition. Since REMAX is a public company, Redfin may essentially end up “going public” via merger, and its investors reap the benefits of that. KWRI is an unknown, but their investment in eEdge makes me think that they’re unlikely to bid for Redfin. BerkshireHathaway has Warren Buffett money, of course, but if Redfin shareholders want the upside that comes from an IPO… I rather think some sort of a stock-and-cash deal with REMAX is probably more attractive.

Then again, maybe Realogy approached Redfin and was rebuffed, so they settled for the second-best option in ZipRealty. Who knows?

The following was posted on Facebook by a friend, James Dwiggins, earlier today. James is not only a very smart guy — also one of the tallest guys in the industry — he’s also the CEO of Nexthome in San Francisco. Because this is long, detailed, and worthy of saving past what Facebook thinks it ought to be, I repost it as a special Guest Blog, with his full permission.

The original thread may be found here. I’ve taken the liberty of minor formatting for legibility but have not otherwise edited this. The image/photo to which the comments were attached is at the top.

==============POST BEGINS HERE================

I’ve been traveling the past week so I haven’t been able to comment on the Zillow/Trulia buyout and I know many of you have asked for my thoughts.

Let’s set the stage first: Trulia was founded May 1st, 2004 and according to CrunchBase, they received 32.8M in venture funding before going public. Zillow was founded in January 2005 and according to CrunchBase, they received 92.5M in venture funding before going public. Both companies set out to change the way consumers search for real estate online and make money off the advertising revenue.

According to NAR, in 2001, homebuyers used Realtors 69% of the time when purchasing homes. In 2013, that number is now 88% of the time. While homebuyers continue to search more and more on non-real estate company sites, ironically they are also using Realtors more as well. My take: finding a home online is the easy part and constitutes about 5% of the entire home buying process.

The hard part begins once you want to make an offer and actually purchase it, which consumers understand to some degree. If they didn’t, those numbers would not be increasing like they have and lots of alternative models that past several years that tried connecting buyers and sellers online would have succeeded. In fact, almost all of those companies have failed. I’ve attached the actual chart showing the increase in Realtor usage from the 2013 NAR Profile of Home Buyers and Sellers.

With regards to everyone worrying about Trulia and Zillow becoming a real estate company or franchise. We all need to understand that this is not their model whatsoever or for their shareholders sake, shouldn’t be.

At the end of Q1 2014, Zillow had 52,968 premier agent subscribers. At the end of Q1 2014, Trulia had 66,700 premier agent subscribers. As everyone knows, their business model depends highly on having real-time listing data on their sites which is provided by brokerages and agents who in many cases are paying for premier placement.

If they became a real estate company, you could almost guarantee two things: 1.) 52,968 & 66,700 premier agents subscribers would likely stop advertising on these sites, destroying their revenue, and eventually the companies as well… and 2.) If Zillow and Trulia were real estate companies, they wouldn’t want competing agents advertising on their sites either. That would be allowing competitors to take away buyers and sellers from their own agents which makes no sense. It’s exactly why every real estate company and franchise doesn’t allow its competitors to advertise on their sites now. That would be counter productive to making money.

In other words, I can’t possibly see how Zillow and Trulia becoming a real estate company would make any sense whatsoever so we should stop worrying about this. If we as an industry are scared of this idea, then we should be paying closer attention to Redfin who is trying to make this kind of model work to some degree. They are not the first and they certainly won’t be the last.

Are Zillow and Trulia dominating the online real estate space and will they continue to grow? The short answer is yes… until either “organized real estate” starts listening to consumer needs and builds something they actually want and will use, or another outside entity creates it. Lots of companies create game-changers and then lose the throne. Think AOL, Netscape, Internet Explorer, IBM. It can be done and it will happen again including our space.

In closing, this is just two major online portals consolidating their businesses in a market that is fast becoming oversaturated as it is. They have just over 110,000 combined subscribers in an industry that has 200,000 potential subscribers at best. They’ll combine resources, streamline operations – (job consolidation) and hopefully become profitable. Please feel free to chime in if you see something different. Rob, Keith,Imran, Nobu, Aaron, I would love to get your take on this as well.

There is something about Zillow that brings out the melodramatic in the real estate commentariat, both of the professional variety and often more hilariously, of the amateur variety. The big bombshell from yesterday, of Zillow acquiring Trulia, has brought out some of the finest performances in a drama and in a comedy.

It’s an odd thing to see both massive over-reaction and huge under-reaction. But such is life in the funhouse that is the American real estate industry.

I’d like to look at a few and just… well… comment, I guess. I don’t know if I have much useful stuff to add, except snarky maybe. Though to be honest, sometimes, snark can be useful!